The European enterprise applications market has endured a severe slowdown in revenue growth over the past 12 to 18 months, but AMR Research predicts it will buck this trend in the long term.

According to AMR, the European enterprise applications market will grow at a compound annual growth rate (CAGR) of 13% to be worth $21.3 billion in 2006, compared to $11.6 billion in 2001.

One of the key characteristics of this increase in revenue, says AMR, will be a reorganisation in cost structures and sales strategies at most of the leading enterprise application vendors. AMR points out that, during 2001, the majority of vendors were subject to a drop in licence revenue, but an increase in service and maintenance revenue. AMR believes this trend is set to continue.

Another feature of the European enterprise applications market between now and 2006 will be a shift in revenue distribution across the various application types. In 2001, more than half (53%) of application revenue came from enterprise resource planning (ERP) software. By 2006, this figure will have halved to 26%. Conversely, the proportion of revenue coming from customer management applications will grow to 40% in 2006, compared with 22% in 2001. Revenue from supply chain management applications will grow from 13% to 15% in the same time frame.

AMR also predicts that the enterprise applications market will gravitate towards fewer, larger vendors, particularly in ERP, supply chain management and sourcing. In customer management, however, the market will remain fragmented for some time to come – at present, the top ten vendors occupy only 50% of the market, whereas in ERP, the top ten account for 79% of revenue.